Canadian foodservice faces profit squeeze despite rising sales
Higher sales figures are failing to translate into healthier bottom lines for Canadian foodservice businesses. A new report from Restaurants Canada shows that 67% of restaurant operators are experiencing lower profitability compared to last year, creating a growing disconnect between top-line revenue and overall business health.
According to the industry association's latest quarterly report, commercial foodservice sales in Canada are projected to grow by 5.1% in 2026. However, rising input expenses and softer guest traffic are continuing to erode profit margins across the country, leaving quick-service restaurants, convenience stores and gas station foodservice counters facing tough financial realities.
Disconnect between sales and profits
The core challenge for operators is a combination of escalating food prices and labour costs paired with a reduced ability to pass those costs onto consumers. Four in 10 operators report fewer guest visits, meaning higher total sales figures are largely the result of forced menu price increases rather than increased customer volume.
Chris Elliott, chief economist and vice-president of research at Restaurants Canada, noted that stronger sales do not necessarily mean healthier restaurants. He explained that rising costs, softer traffic and limited room to increase menu prices further are placing significant pressure on operator profitability and shaping expectations for the year ahead.
This financial pressure is leading to widespread pessimism across the sector. Nearly half of Canadian restaurant operators or 44%, report feeling pessimistic about 2027, compared to just 30% who feel optimistic. Furthermore, 38% expect profitability to drop even further next year, while only 21% anticipate an improvement.
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The margin squeeze is forcing many operators to re-evaluate their staffing needs. Looking toward next year, 29% of operators expect to reduce their headcount, while only 9% anticipate hiring additional workers.
Restaurants Canada president and chief executive officer Kelly Higginson emphasized that operators are caught between rising overhead and budget-conscious consumers who cannot absorb further price hikes. “Canada needs a strong, competitive restaurant industry. That means giving operators the confidence to invest in their businesses, support their employees and serve their communities,” added Higginson. “We’ll be looking at next week’s federal budget for concrete measures that improve affordability and restore business confidence, including steps toward a comprehensive review of Canada’s tax system to reduce the burden on businesses and support long-term growth.”
As the fourth largest private sector employer in Canada, the foodservice industry employs 1.2 million workers and handles 24 million customer visits daily, making its financial stability crucial to the broader national economy.
Industry calls for tax and regulatory relief
To help stabilize the sector, Restaurants Canada is urging federal and provincial governments to introduce policy measures that directly reduce operating costs and restore business confidence. The association highlighted the federal government's recent Productivity Mega Deduction as a helpful example of policy steps that foster business growth.
Heading into the upcoming federal budget, the association is pressing lawmakers for concrete measures aimed at improving affordability. Key recommendations include initiating a comprehensive review of the Canadian tax system to lighten the tax burden on businesses and support sustainable, long-term growth across the foodservice landscape.
